News & Events

Mercator Blog

Debit and Alternative Products Advisory Service Update - September 2018

Date: September 4, 2018

Sarah Grotta

Director, Debit and Alternative Products Advisory Service

Don’t look now, but
summer is nearly over, Labor Day is behind us, and fourth quarter is looming.
It’s time to look at the list of 2018 objectives to assess what can still be
accomplished this year. In case you were on vacation, the following is a list
of recent reports released by Mercator Advisory Group’s Debit and Alternative
Products Advisory Service in case you missed them. Also listed is research
forthcoming soon:

Recent Reports Now Available:

Debit in Digital
Channels

We released a
Viewpoint document on debit cards and their use online, in app, and with
mobile proximity wallets in retail store locations in The Intersection
of Digital and Debit. Consumer survey data collected by
Mercator suggests that U.S. consumers are getting more comfortable using
debit in digital channels but still generally prefer to use credit cards.
This document discusses the reasons for this preference and tactics that
issuers might consider for encouraging more payments on debit cards. Included
is a projection of U.S. e-commerce in total through all payment types.

Annual Debit Data
Book

Mercator’s annual
report on the U.S. debit card market was posted in July: 2018 Annual U.S.
Debit Market Data Review. One interesting trend is the
rise in the growth of debit card transactions and how very closely it mirrors
the decline in the growth of credit card transactions. This really hits home
on to need to have both products in customers’ wallets as changing economic
factors favor one product versus the other. By being the provider of both
credit card and debit card with a consumer, a financial institution is better
able to neutralize the swings in payment type usage. This certainly helps to
make the case for relationship rewards programs that offer rewards across a
relationship for multiple product types. This report also tracks the U.S.
debit market transactions, cards, prevailing trends and what may transpire
next for the market.

Updated Faster
Payments Report

In a report released
in mid-August, U.S. Faster
Payments Forecast, 2017–2021, Update: The Consequences of Faster Payments,
we provide projections for P2P, B2C, C2B, and B2B faster payments out to
2021. These are updated slightly from our projections published in February
of this year as we are tracking where the growth in faster payments is
emerging most quickly. In this report we also take a look at the drive toward
ubiquity of faster payments, which will be challenging in the decentralized,
private industry approach that the U.S. market is taking.

Reports Coming
Soon

Recurring Transactions
In September we will release a report regarding recurring payments and
card-on-file transactions. Given an increase in online and mobile commerce,
the growing market for subscriptions, and billers encouraging direct payments
for regular bills, handling of these transaction for both issuers and
merchants requires some attention. We take a look at the role of account
updater and other best practices.

Interchange
Also forthcoming is a report on changes in interchange rates around the
globe. Market forces and governments mandates are lowering interchange rates
for merchants with ramifications for debit card profitability and checking
account benefits. This report, scheduled to be released in the
September-October timeframe, will look at trends and changes anticipated in
the near term for interchange.

Around the
Industry

Here are some recent industry reports and articles that may be
of interest to you:

Overdraft Fees
and Debit Cards
A bill was introduced in the U.S. Senate in August that will significantly reduce
the number of overdraft transactions that can occur on a transaction account
and the amount that can be charged when overdrafts are permitted. If bill is
enacted, debit card transactions, including ATM withdrawals will not be
allowed to create an overdraft even if the consumer has opted in for
overdraft protection. I wrote about this for PaymentsJournal here. The actual language for Senate Bill 3343
- Stop Overdraft Profiteering Act of 2018 can be found here. Note that since this bill was only
recently introduced, it is a long, long way from being enacted and quite
possibly may never become law. We will continue to follow this legislation,
however, and provide updates as they become known.

Contactless
A lot of buzz has kicked up about contactless card transactions recently.
More stores are accepting contactless. Costco, for one, is now accepting its
Citi Visa co-branded card and Apple Pay with Visa card credentials at its
terminals. Visa recently released a report on the U.S. market for contactless
found here. I am hearing that some of the
largest issuers are considering selectively reissuing some credit card
portfolios with contactless capabilities, but there is less interest at this
time in investing in contactless for debit.

As always, if you have
any comments regarding debit trends or wish to discuss anything in the realm
of pay-now alternative products, I would enjoy hearing from you. Please feel
to email or call: